How to manipulate truthful prior-dependent mechanisms?

Abstract: In the standard formulation of mechanism design, a key assumption is that the designer has reliable information and technology to determine a prior distribution on types of the agents. In the meanwhile, as pointed out by the Wilson's Principle, a mechanism should reply as little as possible on the accuracy of prior type distribution. In this paper, we put forward a model to formalize and quantify this statement. In our model, each agent has a type distribution. In addition, the agent can commit to a fake distribution and bids consistently and credibly with respect to the fake distribution (i.e., plays Bayes equilibrium under the fake distributions). We study the equilibria of the induced distribution-committing games in several well-known mechanisms. Our results can be summarized as follows: (1) the game induced by Myerson's auction under our model is strategically equivalent to the first price auction under the standard model. As a consequence, they are revenue-equivalent as well. (2) the second-price auction yields weakly better revenue than several reserve-based and virtual-value-based auctions, under our fake distribution model. These results echo the recent literature on prior-independent mechanism design.